Settlement Agreement

I. INTRODUCTION

1. Staff of the Mutual Fund Dealers Association of Canada (“Staff”) and the Respondent, Graham Allan Coltart (the “Respondent”), consent and agree to settlement of this matter by way of this agreement (the “Settlement Agreement”).

2. Staff conducted an investigation of the Respondent’s activities which disclosed activity for which the Respondent could be penalized on the exercise of the discretion of the Hearing Panel pursuant to s. 24.1 of By-law No.1.

II. JOINT SETTLEMENT RECOMMENDATION

3. Staff and the Respondent jointly recommend that the Hearing Panel accept the Settlement Agreement.

4. The Respondent admits to the following violations of the By-laws, Rules or Policies of the MFDA:
   1. between June 2011 and September 2016, the Respondent falsified, and used to process transactions, 12 account forms in respect of 8 clients by altering information on the account forms without having the client initial the alterations, contrary to MFDA Rule 2.1.1;
   2. between May 2011 and September 2016, the Respondent obtained, possessed, and in some instances, used to process transactions, 41 pre-signed account forms in respect of 11 clients, contrary to MFDA Rule 2.1.1; and
   3. in or about April 2016, the Respondent, without the prior approval of the Member, directly reimbursed a client for deferred sales charge fees that the client incurred, thereby engaging in personal financial dealings with a client, contrary to the Member’s policies and procedures and MFDA Rules 1.1.2, 2.5.1, 2.1.4, 2.1.1, and MFDA Policy No. 3.

5. Staff and the Respondent agree and consent to the following terms of settlement:
   1. the Respondent shall be prohibited from conducting securities related business in any capacity in the employ of or associated with a Member of the MFDA for a period of 6 months, pursuant to section 24.1.1(e) of By-law No. 1;
   2. the Respondent shall pay costs in the amount of $2,500 in certified funds, pursuant to section 24.2 of By-law No. 1;
   3. the Respondent shall in the future comply with MFDA Rules 2.1.1, 1.1.2, 2.5.1, 2.1.4, 2.1.1, and MFDA Policy No. 3; and
   4. the Respondent will attend in person on the date set for the Settlement Hearing.

6. Staff and the Respondent agree to the settlement on the basis of the facts set out in Part III herein and consent to the making of an Order in the form attached as Schedule “A”.

III. AGREED FACTS

Registration History

7. Between March 2002 and December 29, 2017, the Respondent was registered in Ontario as a mutual fund salesperson (now known as a Dealing Representative) with Quadrus Investment Services Inc. (“Quadrus”), a Member of the MFDA.

8. On December 29, 2017, the Respondent resigned from Quadrus, and is no longer registered in the securities industry in any capacity.

9. At all material times, the Respondent conducted business in the London, Ontario area.

Falsified Forms

10. Between June 2011 and September 2016, the Respondent falsified, and used to process transactions, 12 account forms in respect of 8 clients by using pen to alter information on the account forms to reflect client instructions without having the client initial the alternations.

11. The falsified account forms consisted of fund conversion, fund switch, and redemption forms.

Pre-Signed Account Forms

12. At all material times, Quadrus’ policies and procedures prohibited its Approved Persons from using pre-signed account forms.

13. Between May 2011 and September 2016, the Respondent obtained, possessed, and in 40 instances, used to process transactions, 41 pre-signed account forms in respect of 11 clients.

14. The pre-signed account forms consisted of fund conversion, fund switch, redemption, and automatic withdrawal payment forms.

Reimbursing Deferred Sales Charges To A Client

15. At all material times, Quadrus’ policies and procedures required its Approved Persons to report client complaints to Quadrus. Quadrus’ policies and procedures also prohibited its Approved Persons from engaging in personal financial dealings with clients, and compensating clients without Quadrus’ prior approval.

16. At all material times, client KW was a client of Quadrus whose account was serviced by the Respondent.

17. On or about January 9, 2015, client KW purchased a mutual fund through the Respondent that was subject to a deferred sales charge (“DSC”).

18. On or about April 22, 2015, client KW redeemed the mutual fund and incurred a DSC fee of $403.01. Subsequently, the Respondent met with client KW’s parents, who were also clients of Quadrus, and learned from them that client KW was upset about the DSC fee he incurred.

19. The Respondent states that he mistakenly purchased on behalf of client KW the mutual fund.

20. In or about April 2016, without advising or obtaining the approval of Quadrus, the Respondent directly reimbursed client KW for the DSC fee incurred in the amount of $403.01.

21. In December 2016, in response to a letter Quadrus sent to clients as described below, client KW reported that the Respondent had reimbursed him DSC fees as described above.

Quadrus’ Response

22. In October 2016, Quadrus’ compliance staff identified the falsified and pre-signed forms that are the subject of this Settlement Agreement as a result of a regularly scheduled branch audit and subsequent follow-up investigation.

23. As part of its investigation, Quadrus sent letters to all of the clients serviced by the Respondent in order to determine whether the Respondent had engaged in any unauthorized trading. No clients reported any concerns regarding unauthorized trading.

24. On November 8, 2016, Quadrus issued a disciplinary letter to the Respondent for his use of falsified and pre-signed forms.

25. On December 8, 2016, Quadrus placed the Respondent under close supervision for a period of one year.

26. On January 4, 2017, Quadrus issued a disciplinary letter to the Respondent for reimbursing DSC fees to client KW.

Additional Factors

27. There is no evidence that the Respondent received any financial benefit from engaging in the misconduct described above other than the commissions or fees he would ordinarily be entitled to had the transactions been completed in the proper manner.

28. With respect to the Respondent’s use of falsified and pre-signed forms, there is no evidence of client loss or lack of authorization.

29. The Respondent has not previously been the subject of MFDA disciplinary proceedings.

30. The Respondent states that he is impecunious and unable to pay any additional amounts towards a fine or costs. The Respondent acknowledges that absent his inability to pay, it would have been appropriate for him to be subject to a penalty that included a fine due to the seriousness of the misconduct that is the subject of this Settlement Agreement.

31. By entering into this Settlement Agreement, the Respondent has saved the MFDA the time, resources, and expenses associated with conducting a full hearing on the allegations.

IV. ADDITIONAL TERMS OF SETTLEMENT

32. This settlement is agreed upon in accordance with section 24.4 of MFDA By-law No. 1 and Rules 14 and 15 of the MFDA Rules of Procedure.

33. The Settlement Agreement is subject to acceptance by the Hearing Panel which shall be sought at a hearing (the “Settlement Hearing”). At, or following the conclusion of, the Settlement Hearing, the Hearing Panel may either accept or reject the Settlement Agreement. MFDA Settlement Hearings are typically held in the absence of the public pursuant to section 20.5 of MFDA By-law No. 1 and Rule 15.2(2) of the MFDA Rules of Procedure. If the Hearing Panel accepts the Settlement Agreement, then the proceeding will become open to the public and a copy of the decision of the Hearing Panel and the Settlement Agreement will be made available at mfda.ca.

34. The Settlement Agreement shall become effective and binding upon the Respondent and Staff as of the date of its acceptance by the Hearing Panel. Unless otherwise stated, any monetary penalties and costs imposed upon the Respondent are payable immediately, and any suspensions, revocations, prohibitions, conditions or other terms of the Settlement Agreement shall commence, upon the effective date of the Settlement Agreement.

35. Staff and the Respondent agree that if this Settlement Agreement is accepted by the Hearing Panel:
    1. the Settlement Agreement will constitute the entirety of the evidence to be submitted respecting the Respondent in this matter;
    2. the Respondent waives any rights to a full hearing, a review hearing before the Board of Directors of the MFDA or any securities commission with jurisdiction in the matter under its enabling legislation, or a judicial review or appeal of the matter before any court of competent jurisdiction;
    3. Staff will not initiate any proceeding under the By-laws of the MFDA against the Respondent in respect of the contraventions described in this Settlement Agreement. Nothing in this Settlement Agreement precludes Staff from investigating or initiating proceedings in respect of any contraventions that are not set out in this Settlement Agreement.  Furthermore, nothing in this Settlement Agreement shall relieve the Respondent from fulfilling any continuing regulatory obligations;
    4. the Respondent shall be deemed to have been penalized by the Hearing Panel pursuant to s. 24.1.2 of By-law No. 1 for the purpose of giving notice to the public thereof in accordance with s. 24.5 of By-law No. 1; and
    5. neither Staff nor the Respondent will make any public statement inconsistent with this Settlement Agreement. Nothing in this section is intended to restrict the Respondent from making full answer and defence to any civil or other proceedings against the Respondent.

36. If, for any reason, this Settlement Agreement is not accepted by the Hearing Panel, each of Staff and the Respondent will be entitled to any available proceedings, remedies and challenges, including proceeding to a disciplinary hearing pursuant to sections 20 and 24 of By-law No. 1, unaffected by the Settlement Agreement or the settlement negotiations.

37. Staff and the Respondent agree that the terms of the Settlement Agreement, including the attached Schedule “A”, will be released to the public only if and when the Settlement Agreement is accepted by the Hearing Panel.

38. The Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement. A facsimile copy of any signature shall be effective as an original signature.